Roughly 57% of Americans have a life insurance policy in place. This is good news as it means that they have survived the complex buying process. However, for some unwary customers, getting a life insurance policy remains perplexing and could even cause financial issues later on.
A joint study by the trade group, Limra, and a nonprofit insurance advocate, Life Happens, found that the sales standards followed by life insurance agents and brokers weren’t strict enough. Add that to the complexity of various life insurance products and customers would certainly fail to select the best policy and get proper advice.
According to insurance companies, their current rules have been set to ensure that customers get advice based on their specific needs. However, consumer advocates and financial advisors argued that those rules were too loose. Larry Rybka, ValMark Financial Group’s chairman and CEO, even said that the rules were almost unregulated in terms of duty owed to customers.
Rybka added that there are thousands of financial products available today and life insurance is the most complex one. Not all types of life insurance are overwhelming but on the subject of cash-value insurance — namely, “permanent life insurance” — there would be a rather complicated discussion.
In the past couple of years, some insurance firms have been sued by policyholders who encountered more loss than gain. One example is the insurer Transamerica who settled its lawsuit for $195 million back in 2018.
On the bright side, numerous online portals are now helping people learn about life insurance and compare rates among different companies. Aside from using these resources, remember that a policy that may appear cheaper today may not be so later on. This reminder should be helpful in avoiding potential financial risks from life insurance products.